Hello, and thank you for standing by. Welcome to the Nektar Therapeutics Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Vivian Wu from Nektar Investor Relations to kick things off. Please go ahead.

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. Today, you will hear from Howard Robin, our President and Chief Executive Officer; Dr. Jonathan Zalevsky, our Chief Research and Development Officer; and Sandra Gardiner, our Chief Financial Officer. Dr. Mary Tagliaferri, our Chief Medical Officer, will also be available during the question-and-answer session. On today's call, we expect to make forward-looking statements regarding the business, including statements regarding the therapeutic potential of and future development plans for rezpegaldesleukin, the timing and plans for future clinical data presentations and other statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to uncertainties and risks that are difficult to predict and many of which are outside of our control. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in our latest Form 10-Q available at sec.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments or otherwise. A webcast of this call will be available on the IR page of Nektar's website at nektar.com. With that said, I would like to hand the call over to our President and CEO, Howard Robin. Howard?

Thank you, Vivian, and good afternoon, everyone. Before I start with remarks for the quarter, I'd like to take a minute to welcome Dr. Mary Tagliaferri back to the company, who has recently rejoined us as Chief Medical Officer after a need to step away for personal reasons earlier this year. Mary was instrumental in the design and execution of our successful Phase II program in atopic dermatitis, and we are so fortunate that she has now rejoined us as we prepare for the initiation of the Phase III program next year. I'd also like to thank Brian Kotzin for his help serving as the Interim CMO during the period. Brian has worked with us for nearly 10 years, and we are grateful that he will continue to serve as a medical consultant. This quarter and year-to-date, we've remained laser-focused on pursuing regulatory T cell science across our pipeline and preparing to advance our lead program, rezpegaldesleukin, also known as REZPEG, into Phase III development. Our pipeline programs are focused on stimulating Tregs in different ways to restore the proper balance between T effector cells and T regulatory cells and achieve homeostasis in the immune system. The data in atopic dermatitis reported in June and presented at EADV 2025 for REZPEG represented a powerful translation of the scientific discoveries that led to an understanding of the importance of Tregs into the first demonstration of their clear clinical efficacy in autoimmune disease. The Nobel Prize in Physiology or Medicine was recently awarded for these discoveries that established FOXP3-positive Tregs as key enforcers of immune tolerance. We're very humbled that the Nobel Committee included the publication of the Phase Ib data for REZPEG in atopic dermatitis and psoriasis as support in the background documents for this award. The recognition of REZPEG was…

Thanks, Howard, and thank you, everyone, on the call for joining us today. To begin, I'll remind you that earlier this year, the RESOLVE-AD Phase IIb results demonstrated the promise of Nektar's novel approach to the IL-2 pathway. The global study randomized 393 patients with moderate to severe atopic dermatitis to receive subcutaneous treatment with 3 doses of REZPEG, a high dose of 24 microgram per kilogram every 2 weeks, a middle dose of 18 microgram per kilogram every 2 weeks and a low dose of 24 microgram per kilogram every 4 weeks or placebo every 2 weeks for an induction period of 16 weeks. Following week 16, REZPEG-treated patients who achieved EASI reductions of 50% or greater were rerandomized to continue at the same dose level on a Q4-week or Q12-week regimen for an additional 36-week maintenance period. In our June data disclosure, we reported that the study achieved statistical significance on the primary endpoint at week 16 for a mean percent change in EASI score from baseline for all REZPEG arms versus placebo. And the study achieved statistical significance for key secondary endpoints at week 16 of disease reduction, including EASI-75, EASI-90, Itch NRS, the vIGA-AD and BSA. Additionally, we have yet to see a plateau in the efficacy response in the REZPEG treatment arms. This study is currently ongoing with 2 additional upcoming data readouts that Howard mentioned. The first will be the 36-week maintenance study results, which compare treatment with REZPEG at either 1 month or 3-month dosing intervals out to a full year, which would be the intended maintenance-based dosing regimens following the 16-week induction period. And the second readout will be the 1-year off-treatment data expected in the beginning of 2027, which will measure the potential remittive effect of REZPEG in atopic dermatitis. In…

Thank you, JZ, and good afternoon, everyone. On today's call, I'll briefly review our quarterly financials and share updates to our financial guidance for 2025. We ended the third quarter of 2025 with $270.2 million in cash and investments and with no debt on our balance sheet. As discussed in our Q2 earnings call, this end of third quarter cash balance includes the completion of the secondary public offering in July with net proceeds of approximately $107 million. It also includes additional net proceeds of $34.3 million we raised in September from our existing ATM facility. We now expect to end the year with approximately $240 million in cash and investments, up from our prior guidance of $100 million to $185 million. This increased year-end guidance also includes $38.3 million of net proceeds from additional sales of our ATM facility in October. Based upon our higher year-end cash balance, we are extending our cash runway guidance into the second quarter of 2027. Now turning to the income statement. Our noncash royalty revenue was $11.5 million for the third quarter of 2025. We still expect our noncash royalty revenue to total approximately $40 million for the full year. Our R&D expense was $27.3 million for the third quarter of 2025, and we still anticipate full year R&D expense to range between $125 million and $130 million, including approximately $5 million to $10 million of noncash depreciation and stock-based compensation expense. Our G&A expense was $16.1 million for the third quarter. We still expect G&A for the full year of 2025 to be between $70 million and $75 million including approximately $5 million to $10 million of noncash depreciation and stock-based compensation expense. Noncash interest expense for the third quarter was $6 million, and we still expect noncash interest expense for the full year to total approximately $20 million. Our noncash loss from equity method investment was $0.5 million in the third quarter of 2025, and we still expect noncash loss of approximately $10 million for the full year 2025. As an equity investor in Gannet BioChem, we have no commitment to contribute cash to Gannet. Our net loss for the third quarter was $35.5 million or $1.87 basic and diluted net loss per share. And as I stated earlier, we now expect to end the year with approximately $240 million in cash and investments with our cash runway extending into the second quarter of 2027. Finally, as we head into our December data reporting, we intend to enter into a quiet period for the month of December until we report the top line results for the REZPEG alopecia study. And with that, we'll now open the call for questions. Operator?

[Operator Instructions] Our first question will come from Yasmeen Rahimi from Piper Sandler.

Congrats on a great quarter. This is [ Dominic ] on for Yasmeen Rahimi. We just had a quick question on the upcoming ACAAI data that will be presented. Could you help us understand what you hope to report presentation in patients with AD and asthma? And then moving forward, how would you expect this data to, I guess, impact development in asthma?

Well, let me -- I'll have JZ answer that, but I would tell you that at this point, we're not pursuing an asthma indication. I think -- however, I think it's important to recognize the -- that in atopic dermatitis, the fact that we have an important drug that potentially solves that comorbidity issue is very exciting. And as I said earlier, 25% of the patients who have atopic dermatitis also have asthma as a comorbidity. So it's -- I think it's a very important component of differentiating REZPEG, although we don't have a plan to run an asthma study. JZ, would you like to help with the rest of the question?

Sure. Yes. Thanks for the question, Dominic. So at the ACAAI presentation, we are presenting the results of a preplanned exploratory analysis that was included in the study. There's a validated questionnaire instrument that it's like a patient-reported outcome around -- it's ACQ-5, which stands for the asthma control questionnaire. And with that, you can assess the comorbidity symptoms of asthma in patients that have both atopic dermatitis as well as asthma. And that allows you to look at the total sort of improvement in the ACQ-5 scores over time. But it also lets you isolate on patients that have more severe, for example, uncontrolled asthma at baseline, and that's a subset of people that have higher scores on ACQ-5 at baseline. For us, this is really interesting because like we discussed, roughly 25% of patients have that, so roughly 100 people in our study also had asthma in addition to atopic dermatitis. And this allows us to assess the effect of REZPEG on asthma control and even potentially the improvement of those asthma symptoms in patients that also had atopic dermatitis. So one of the things that's so important about that is that when you are faced with treatment decisions as a physician. And you know you have patients with atopy and atopy constantly includes other organs. That's why such a high proportion of atopic dermatitis patients also have asthma. That starts to influence some of the treatment decisions. Right now, Dupi is really the drug that's gone to for people with comorbidity as Dupi has demonstrated activity in both asthma and atopic dermatitis and in patients that express both symptoms as well as each indication separately. And that's really likely with the IL-4 component of its mechanism. But the other agents in the class approved, atopic dermatitis don't have nearly the level of effect that Dupi does. So this is a differentiating element of the Treg mechanism of REZPEG, and we do think differentiates REZPEG further from the other molecules in the class. And the other molecules in development as well as the approved agents like as IL-13 selective antagonist and the OX40 classes as well. And we think it's something that is potential to really further build upon with REZPEG and something that we'll be exploring and thinking a lot about in the future, both in the setting of the comorbidity and as Howard said, even beyond.

Our next question will come from Julian Harrison from BTIG.

Congrats on all the recent progress. It looks like you've had a few months now to socialize with the medical community, the initial RESOLVE-AD results and REZPEG's potential here. I'm wondering if you have a good sense now for the level of interest for a therapy that potentially has a truly remittive effect. To what extent do you think that could emerge as a differentiator for REZPEG in atopic derm? And then switching to alopecia areata. JZ, I heard your comments around the Olumiant low-dose magnitude of efficacy potentially setting the bar. Do you see maybe an opportunity for use if efficacy is even lower than that, just given how presumably safe REZPEG is potentially free of box warnings compared to JAK inhibitors?

Julian, I'll take the first part of the question. Look, clearly, this mechanism, Treg mechanism has received a lot of attention, especially in the Novo Prize in physiology or medicine. And I think given this very strong data we have in atopic dermatitis and the cross -- the rescue data or the escape arm data, I should say, where patients who failed to see any response on placebo did exceptionally well when they were crossed over to drug. I think that's incredibly compelling data and we're very proud of that. The combination of that data with what we now see in the comorbidity of asthma, I think, sets apart REZPEG from a number of different drugs in treating atopic dermatitis. So yes, to answer your question more directly, there's a lot of interest in it. There's a lot of inbound interest in it, and I think it's going to have very good prospects. I'll let JZ handle the rest of the question.

Yes. Thanks, Howard, and Julian. And so I mean, in the context of the benchmarks, I think what's really important is that REZPEG has the potential to be a truly differentiated mechanism in alopecia areata by numerous factors. And one of those is especially given its safety profile. Right now, there are no approved biologics in the alopecia areata space. And there's really been no therapy that's demonstrated like a sustained treatment effect. And what I mean by that is like even the short-term interruption in a JAK course can cause hair thinning. It's really quick to wear off. And so you have the ability to address so many features that both affect the disease and then the convenience factor for the patient and substantially the comfort level for the physician in a drug that doesn't have a black box warning, which is one of the issues and limitations of the JAK inhibitors. There's no question that those are great drugs for reducing inflammation and reducing inflammation quickly. They're just very difficult drugs to take for a long period of time, and these are chronic conditions. So it's really the challenge with the drug like that. But with REZPEG, you can turn the whole problem on its side. And we have done a lot of the market research we've tested the profile and the profile of low-dose Olumiant, we find is very competitive given all of the other elements, features of the mechanism of action and the differentiated safety profile. And we know that there's space there, to your point, Julian. So -- but we're using that as a reasonable kind of proxy benchmark for now. It is an approved drug and an approved dose, but there is some space around that, to your point.

Our next question will come from Jay Olson from [ OpCo ]

This is [ Cheng ] on the line for Jay. Congrats on the progress. Maybe speaking to the AA, I'm just wondering how fast you can maybe start the Phase III program? And are you planning to move the program by yourself or in a partnership if the December data is positive? And separately, I'm also wondering, in the Phase IIb AD study, are there any patients have alopecia areata comorbidities? And if so, any color you can share on those patients?

Well, I think I got -- I think the first part of your question, I didn't hear it all clearly. But I think the first part of your question -- I'll let JZ take the second part. The first part was when do we think we could start a study in alopecia areata. I think depending on the data that we received in December, we certainly would look forward to starting it next year. I think it's important because as we talked about, the only current therapy is a JAK inhibitor, and they come with lots of concerns and warnings. And as I did describe that at a physician surveys that we've conducted, physicians are somewhat reluctant to use a JAK inhibitor to treat alopecia areata given the safety concerns. So I think if we have a new modality to treat such a very serious disease and a condition that causes extreme depression in people, I think it could be very, very important. And consequently, we do plan to start that study next year. I'll let JZ comment on the rest.

Yes. Thanks, [ Cheng ]. So we did look at multiple comorbidities in the atopic dermatitis Phase IIb study. Asthma was by far the largest patient population, as I mentioned, roughly 100 people had both atopic dermatitis and asthma in that study, and they'll be presented at ACAAI this weekend. In terms of alopecia, we also looked at vitiligo, for example, very, very few people. So really not a large enough patient population to isolate out as a subgroup, like a handful of few people in alopecia that had both of the diseases. Obviously, our Phase IIb results in alopecia, which read out next month, I mean, that is by far a more definitive data set, right? Much, much larger sample size, obviously, a patient population enrolled with that as their primary disease. And then, of course, we'll be looking at the treatment effect in that patient population reported next month.

Our next question comes from Cha Cha Yang from Jefferies.

This is Cha Cha on for Roger Song. I was wondering in addition to low-dose Olumiant, are there any therapeutics that are in development, biologics for alopecia that you think would be an appropriate benchmark? And then my second question is, are there any IL-2 specific studies that you think could provide read-through to REZPEG in alopecia?

JZ, do you want to cover that?

Sure. So yes, there are a couple of biologics in development for alopecia. And we discussed them like an IL-7 receptor and other kinds of agents. So I think that those -- there are some earlier data sets. Our goal is we were doing a much, much larger study than those earlier programs. As we described, 94 people were enrolled and randomized in the Phase IIb alopecia study that we're doing. We also have multiple doses. So a much larger study that gives a chance to really assess the treatment effect, which I think is going to be more informative than a lot of the single arm or much, much smaller studies that have been done to date. But it's certainly an area that people are exploring. Tregs remain a very important mechanism that is invoked from all a lot of translational studies in patients with alopecia areata. We know that there are low levels and deficiencies in Treg function. We also know Tregs are necessary for hair growth and for hair moving through the hair growth cycle. And the actual antigen phase that actually is associated with the elongation of the hair once it attaches down at the root actually requires Treg signaling to the stem cell compartment. So we know that those are multiple key mechanisms. And those are one of the big reasons why we're so excited in conducting the study that we'll be reading out the top line data for next month. And then in terms of IL-2 specific studies, there have only been a few studies that have been published with IL-2. One was a case study and one was a small randomized study. The main situation is low-dose IL-2 is really not a good proxy for REZPEG. With REZPEG, we do such a higher amount of Tregs, much, much higher than low-dose IL-2 can ever achieve, a much greater duration of Treg elevation from a given dose and the ability to treat for a very long time. As you know, we've now treated patients for over a year. For example, for a 52-week period in the Phase IIb study in atopic dermatitis. So it's definitely a surrogate in the sense of a Treg elevating agent, but really REZPEG substantially exceeds anything that low-dose IL-2 has been able to present across multiple indications.

Our next question will come from Mayank Mamtani from B. Riley Securities.

Congrats on a productive quarter. On the alopecia top line data analysis, would you have any off-treatment responder rate you plan to report on given some patients may have been past that 36-week treatment period? And if you could remind us if there's an escape arm option here for the placebo non-responders to cross over. Obviously, wonder from your AtD experience, the peak efficacy from the EADV data, you didn't get until 24, 48 -- 44 weeks even. So I just wonder what's your plan to assess if efficacy increases beyond that 36-week period, what's the kind of plan there? And then I have a quick follow-up.

Sure. Yes. So firstly, in the kind of information that we would present in December, we'll be presenting data from the 36-week induction period in the study. The primary endpoint is the mean percent reduction in SALT score from baseline. And then the key secondary endpoints that are really, really meaningful is the proportion of people that achieved the SALT 20 and also SALT 10. SALT 20 is the registrational endpoint in the U.S. and SALT 10 in Europe. And then I mentioned earlier in the presentation, also the additional secondary endpoints, some of the time-dependent endpoints and some of the proportional increases in the kind of hair regrowth, right, as metrics. And then the other thing that kind of round out the baseline demographics, the safety profile, all the other things. But importantly, Mayank, right, the study is still going to be ongoing. So as you know, the way we designed the study is people that reached week 36 that are experiencing benefits such as hair regrowth, for example, but that have not yet reached a SALT 20 metric, they have the opportunity to take an additional 16 weeks of treatment to 52 weeks for a full year. So there's a proportion of people that will be ongoing. And also the study design has a 24-week off-drug observation period. So whenever a patient completes treatment, whether that's at 9 months or 12 months, there is then followed for that additional 24-week period of time. And that's really designed to assess that if you grew hair, can you keep hair, right, which is a significant differentiating element from a JAK mechanism of action where the hair loss is really, really rapid when the drug dosing is stopped. So because the study is still ongoing, I mean, we can't say yet the totality. But definitely, the 36-week endpoint, which is the primary analysis with the entire population crossing the 36-week is going to be the main subject of that top line presentation.

Escape arm, is there an escape arm here?

No, there's no escape arm in the study.

Okay. And on the auto-injector development, how far along are you? And is that going to be at the start of your Phase III study? And is that kind of part of the protocol as you get into the end of Phase II discussion?

Sure. Yes. So the auto-injector development is ongoing. And our goal and plan is to have the auto-injector available at the time of launch of REZPEG. The Phase III studies will be conducted in the same way the Phase II studies were where the drug would be used in a vial. And for us, it's -- we maintain that really for speed because this allows us to start the Phase III studies as quickly as possible relative to when we presented the top line data in June of this year. And then in terms of your other question, just contextually at an end of Phase II meeting, you really discuss everything in the plan to your BLA. So that includes not just the Phase III clinical development program, the registrational and pivotal studies, it also includes the CMC. So yes, we have presented our plans for the final presentation of the product, the auto-injector and then all the work that we do during the Phase III studies into the BLA to have that available for launch.

Our next question will come from Arthur He from H.C. Wainwright.

Sorry, I apologize if the question has been asked before. So given the readout coming readout for the alopecia, JZ, maybe could you tell us a little bit more like what the potential REZPEG can offer compared to the JAK inhibitor here for the alopecia patient?

Yes, it's a great question. I mean I think that one of the situations with the JAK inhibitors, and we touched a little bit on this earlier, is that they definitely are effective at reducing inflammation. Like if you have common gamma chain uses in multiple cytokines, use any either homo or heterodimers of JAKs. And it's an important part of the signaling cascade in response to multiple cytokines, and they're well known as effective ways of lowering inflammation quite quickly. But the challenge with using a JAK inhibitor in any indication where it's approved is that long-term use carries with it some disadvantages, right? So the drugs have black box warnings. They have other significant limitations. They require monitoring. There's just a number of things that make them a little bit more delicate to use. And in the dermatological setting, some of those things are a little bit undesirable. So one of the things that REZPEG can offer is if the efficacy profile, as we discussed, reaches a benchmark such as a low-dose JAK in, say, the Olumiant setting, it already brings with it a completely different risk profile, right? It would not have a black box warning, it would have a completely different and much, much better safety profile and really has a safety profile that's much more aligned with being a very long-term chronic use drug. Also, the potential of being the first biologic in this space gives us a real tremendous advantage because that starts to really open access because we've learned from multiple studies that physicians are they're not so necessarily excited to try JAKs as a first option for patients with the disease. So having another alternative that's available could take a significant -- an opportunity advantage. And then the last one is really comes down to that potential of maintenance. So JAK inhibitors really lose their effect very quickly. And it can be very psychologically difficult for patients because if you spend weeks and months regrowing hair that you didn't have in a really long time and then any need to interrupt the JAK, whether it's a safety signal or other reason or liver enzyme elevation or something, then that can lead to loss of all the hair that you've grown, which can further drive the depression cycle. That's a component of this disease. With REZPEG, there's the potential of maintaining the hair that was grown, having interruptions in drug dosing not be a problem. And that would be completely transformational. So these are all things that we think contribute to a very substantial opportunity for REZPEG and alopecia areata.

So another question is given that you've passed in the data there, how should we think about the primary endpoint for the approval there in the future? Do you think the SALT 20 is still could do the job? Or we probably should look to the SALT 10 or even SALT 0 there for the future drug for the alopecia there?

Yes. Well, I mean, the health authority set the registrational endpoints, right? And so right now, those are defined, right, as SALT 20 in the U.S. and SALT 10 in Europe. But obviously, every study measures multiple secondaries, right, including eyelash, including SALT 0 and so on. So I think that we leave that in the hands of the regulators. In terms of UPA's efficacy, I mean, it's -- I think everywhere that there are multiple JAK inhibitors approved, UPA or RINVOQ seems to always win, right? It just consistently produces the greatest amount of efficacy compared when it goes head-to-head against other agents. And I think we've seen that in multiple indications, Arthur, right, not just in dose 1. It does carry with it a little bit more of a safety profile, which is the [ take ] related, right? It's more on target and more on-target tox in addition to other things. But I do think as compared to the other JAK inhibitors, that UPA is going to be very important, probably take a significant position against the other JAK inhibitors. But we don't really see that as impacting the biologics, right? Again, there are numerous indications where biologics and small molecules, JAKs and non-JAKs coexist. Atopic dermatitis is a great example. In psoriasis, you have TYK2 mechanism coexisting and others. And there's really a large enough patient share and the need for multiple mechanisms that always makes plenty of room for multiple mechanisms in this indication.

And we do have time for one last question. And our last question will come from Andy Hsieh from William Blair.

Mary, it's great to have you back. So we have 2 questions. So for the RESOLVE-AD study, I believe you spent a lot of time and resources to ensure that the placebo rate is low. So have you gotten a chance to review that initiative so that you can be best positioned for the positive Phase III outcome? And then the second question, maybe for Howard, what's your current manufacturing footprint? I figured given the intense interest in REZPEG, it would be really nice if you can secure one of those national priority vouchers.

I'll take the second part first, and Mary can continue. Look, we are looking at a number of different options there. We sold our PEGylation manufacturing facility to Gannet BioChem, but we have a priority position there, and we certainly have a guaranteed source of those raw materials. And we have a number of different contract manufacturing companies, very well-known companies that we work with. So I'm not concerned about at this point, the ability to manufacture -- successfully manufacture REZPEG, and we are looking at the vouchers, et cetera. I will let Mary talk to you about the other part of your question.

Thanks, Howard. And really great to hear your voice, too, Andy, and I'm really happy to be back. I mean, as you said, the data from RESOLVE-AD are very exciting. And I've also had the opportunity to speak to multiple dermatologists since I've been back, who are also very excited about the totality of the data, the speed of onset and the excellent safety profile. So it's very exciting to move this forward. And certainly, in our Phase III program, we have every plan to implement the exact same procedures that we did to minimize the placebo effect. And some of those are, of course, ensuring that we have board-certified dermatologists participating in our clinical trials. We also make sure that the eligibility criteria is met both in the screening and right before patients are randomized. And so we took multiple actions. Also in our Phase IIb, we had a quite large size of our placebo group, and we will, of course, have the same when we proceed forward in a larger Phase III study. So we were very pleased that we were able to implement multiple different procedures and activities in order to ensure our placebo effect was very low, and we believe we will continue to be very successful in our Phase III as well. So we look forward to moving forward. We've been doing a lot of planning. We're going to have our end of Phase II meeting with the FDA by the end of this year, and so we'll have a clear path forward to a BLA.

And this does conclude our question-and-answer session for today's conference. I'd like to turn the call back over to Howard Robin for any closing remarks.

Well, thank you, Crystal, and thank you, everyone, for joining us today, and we greatly appreciate your continued support. And I want to thank all of the patients and their caregivers that have trusted and continue to trust Nektar to treat their disease. None of this research would be possible without them. And I also want to thank our employees for their dedication and extremely hard work, and we look forward to delivering data from our REZPEG program data in alopecia areata in December and additional results from the program in atopic dermatitis in the first quarter of next year. So please stay tuned. Thanks for joining us.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.